Tuesday, December 07, 2004

Solve the Deficit Through Consumer Debt?

A Redder State of Mind has got me thinking today with this post. He suggests an idea that he believes will boost the economy, lower the deficit, and help consumers: get the U.S. government in the credit card business. His selling points are more credit equals more purchases of U.S. goods (he suggests giving cash back for purchases made in the U.S.A.), lower credit rates to help consumers, and the use of the funds generated to pay off the national debt.

Could it work? I'm skeptical about the cash back part, I think it's just too difficult to determine the manufacturing country in today's global economy. I don't think you would need that to market the cards, though - just lowering the rates would get the economy booming (imagine a credit card with an interest rate tied to 5 points above the Fed Funds Rate, for example).

I'm squemish about this being a direct government function, as well, for reasons to do with credit qualification and debt collection and fears of corruption. However, what about a Government Sponsored Enterprise (GSA) like Sallie Mae and Fannie Mae? To those who object to the government lending money, we do it already through bank, student, and mortgage loans. Privacy is an issue the post and its comments raise as well. Go read it...it's an idea worth at least exploring.